This was a January 1993 submission by the Labor Council of NSW to the Keating government in follow up to the Prime Minister’s One Nation policy statement of the year before and in response to an invitation to submit “fresh ideas” on employment at the start of 1993. The topics covered were:
1. Maximising Employment, Including a Post 45 Year Olds’ Employment Policy
2. Regional Headquarters Policy
3. Getting Better Value from Business Migration
4. Completion of the National Optic Fibre Telecommunications Network.
1. MAXIMISING EMPLOYMENT IN THE 1990s
Australia is climbing out of a recession which hit all of the major world economies in the early 1990s. As an economy so reliant on international trade in commodities, the world slowdown was transmitted quickly to the Australian economy.
With what are now – entering 1993 – historically low levels of inflation and interest rates, however, Australia is poised to enter one of the most solid and sustained periods of economic and employment growth in its history.
This optimism is strengthened by the national commitment to significant and continuing micro-economic reform and genuine enterprise bargaining in the context of the union movement’s commitment to wage claims consistent with the maintenance of our international competitiveness.
However, the legacy of the recession is the loss of some 300,000 of the 1.75 million jobs generated under the period of the Hawke/Keating Labor governments. Combined with the rapid growth in the Australian labour force, the result is eleven per cent unemployment and the likelihood of a pool of long-term unemployed existing for some years to come.
Even with the positive impact of the One Nation package, unemployment is expected to be over 9 per cent in 1993-94 and over 8 percent in 1994-95.
While the hope of sustained levels of unemployment below six per cent has been set back by the impact of the recession, Australia has a peerless record on employment growth over the 1980s compared to any OECD country.
It is time to acknowledge the changes taking place in the labour market, re-jig approaches where necessary and harness the positive energies which have driven Labor’s past employment achievements.
No Hope From Fightback
We should be under no illusion about the conservatives solution to the disaster of long-term unemployment.
The Opposition’s Employment and Industrial Relations spokesman, Mr Howard said he wished Australia could go back to the days when there were “dead-end jobs”:
We used to have a saying in Australia called the ‘dead-end job’, that referred to somebody who got a job that did not involve any kind of training… I would like to see Australia go back to those days…1
John Howard has publicly revealed the policy bankruptcy of the Liberal/National alternative for Australia.
Slap a 15 percent tax on nearly everything, smash our record low inflation and interest rates, create a new industrial relations cold war, hound people off welfare benefits and satisfy the community’s employment demands by the creation of dead-end jobs bereft of training and advancement.
John Howard’s vision of a ‘dead-end job’ economy is a vision, as Ross Gittins put it, of: “… an economy at the bottom of the pile in the international division of labour; one with a low standard of living, producing low-value, labour intensive goods and watching the nations with cleverer, better equipped workers pass it by.”2
Australians can take no comfort from the continuing inability of the conservatives to articulate a humane and relevant vision for Australia in the 1990s.
Employment: The Main Game
There is no doubt that the most profound issue concerning the Labor Party in the 1990s is the level of employment.
The original commitment to full employment in this country was established by the Labor government in the mid 1940s.
Labor’s 1945 White Paper, Full Employment in Australia, was a unique and historic prospectus in Australian politics.
It represented the authentic, visionary reformist tradition of the ALP. The document was the cornerstone of Labor’s aspirations for a new Australia with equal opportunity for all.
It repeatedly drove home the point that the Commonwealth and the state governments must join forces if full employment was to be achieved and sustained.
Mr. J.J. Dedman, Minister for Post-War Reconstruction, when introducing the Bill argued that:
…There will be no place in this full employment policy for schemes designed to make work for work’s sake. Moreover, full advantage must be taken of modem methods of production and training in all branches of industry, and the economic system must be flexible enough to meet changing needs.
The Curtin and Chifley Labor governments knew that the commitment to full employment was not going to be a quick and easy fix. But the commitment was right and they made it.
Yet today the community is constantly being conditioned by conservative commentators and other economic doomsayers to accept the inevitability of double digit unemployment for the rest of the decade.
This defeatism can be resisted. It must be rejected.
A second term Keating government should be based on nothing less than the reassertion of the Labor Party’s historic commitment to the creation and maintenance of full employment in Australia.
An Achievable Target
The idea of full employment is Labor’s. The Keating Labor government must ambitiously pursue that aim.
For Labor the concept of ‘international best practice’ could not be better applied than in relation to our unemployment performance.
In December 1992, Australia’s general unemployment rate stood at 11.3 percent while Holland’s was 4.5 percent, Sweden’s 5.5 percent, Switzerland’s 4.2 percent and Japan’s an impressive 2.3 percent.
Australia should not accept such a relatively poor unemployment performance. Other major economies are also suffering high levels of unemployment. Canada’s rate is 11.5 percent, France’s 10.5 percent, Italy’s 10.0 percent, Britain’s 10.3 percent while Spain’s unemployment rate stands at 15.5 percent.
But this can hardly be a source of satisfaction, even if those statistics place Australia’s situation in some perspective and indicate both the depth and breadth of the international recession. Best practice means achieving with the best and that must be the benchmark against which we seek to perform.
In re-affirming the commitment to full employment it must be accepted, as Chifley observed, that its achievement will not occur overnight but will be the result of a comprehensive and well grounded medium-term strategy.
The labour movement should define and target full employment in credible terms. For targets to have relevance they must have credibility; the experience of the 1980s was that despite enormous growth in employment (in absolute and historical terms), unemployment fell only briefly below six per cent.
Given the massive structural changes which have taken place in the Australian labour market (particularly the rise in participation rates) and the experience of the 1980s, a credible target for full employment would be an unemployment rate of 5 per cent.
Given the ongoing employment shake-out resulting from continuing structural reforms and the lagged impact of the recession and, given the commitment to containing inflation to at least the levels of our major trading partners, a realistic timetable for achieving reductions in unemployment must be established.
The Keating government should make a commitment to reduce unemployment to five percent or less within the next two terms. The aim should be to reduce unemployment by a minimum of 1.25 per cent each year.
To the conservative critics who argue they have superior policies to reduce unemployment, one only has to point to the salient facts.
If the policies (and abysmal employment performance) of the last Fraser/Howard government continued through the 1980s, Australia’s unemployment rate would now be around the levels of Spain – 15 percent plus.
The performance of the British Conservative government is also instructive. Despite the full frontal assault on the trade union movement (the Conservatives’ scapegoat for all British economic ills) and regular fiddling with the unemployment definitions (and despite the massive trade boost of North Sea oil) British unemployment rose in December 1992 for the 32nd month running.
The British government has changed its definition of unemployment no fewer than 30 times since 1979 (and all but one of these changes reduced the measured total). The total level of unemployment in expected to soon hit 3 million and is expected to reach 11.3 percent (even on Britain’s modified measures).3
At the same time, British inflation is running at over three times Australia’s rate. If the conservatives have the magic answers they did not reveal them in their last period in office in Canberra, nor have they in the last 13 years in Britain. Fightback II merely confirms the continuing policy bankruptcy.
A Broad-based Medium Term Strategy
The target unemployment reductions will require much more than long-term low inflationary economic growth, essential though that will be. It will require new approaches to education, training, payroll tax, social security and the right to work.
Economic growth and a simple reliance on the free market without a substantially enhanced commitment to active training and labour market programs will not deliver the necessary jobs to move Australia towards full employment.
Since 1990 government spending on labour market programs has risen by 70 per cent per unemployed person.
There has also been a greater focus on those with specific difficulties, such as the long-term unemployed.
This increased financial support is welcomed but Australia is still spending less in per capita terms than the OECD average, and we are spending 30 per cent less per unemployed person than we were spending in 1984-85.
On current trends, it is likely that only 30 per cent of the unemployed will have access to training or work experience in 1992-93.
In NSW alone, since 1990 more than 25,000 positions have been cut from TAFE. An estimated 55,000 school leavers were turned away from TAFE in the beginning of 1992. A similar outcome is expected this year.
Improving the skill base of the workforce must not be seen as a last-resort, defensive activity, undertaken to relieve temporary skill shortages or retrenchment.
Our future lies not in John Howard’s ‘dead end job’ economy but rather in exploiting our recognised comparative advantage in educational, technological, and professional skills in education, law, accounting, engineering, health and medical services and the like.
Education and training must be an essential component of long-term strategies to maintain and strengthen competitive advantage and increase employability.
The Federal government’s primary commitment to enhance medium term employment prospects must be to ensure that there are enough training, retraining and post-secondary places for all who require them.
The West Germans have committed themselves to providing a training place for every school leaver who wants one. This is one international best practice Australia must adopt.
No one is arguing that this target can be met immediately nor that the increased demand for places resulting from the impact of the recession makes the task any easier to achieve, but it should be a commitment to realise this result by the end of the next term.
A major consequence of micro-economic reform and particularly tariff reform is that workers in the least profitable and/or efficient firms are being threatened with unemployment.
Sufficient, effective and comprehensive labour market measures must assist such workers if the reform agenda is to carry the public support required for its success.
Measures must be designed to enable workers to transfer to new jobs in expanding firms through the provision of retraining, skill enhancement, information and financial support during the transition process.
This approach allows for rapid structural change while ensuring that the costs of structural change are shifted from the individual workers to the broader community.
Society as a whole will benefit enormously from structural reforms over time – but the cost of such reform must not be placed on the backs of individual workers.
Australia must develop an elaborate ‘safety net’ including, early warning of retrenchments, and incentives to retrain, enhance skills and relocate.
Structural change must become part of a potential career path rather than be seen as a threat to income and employment security.
Given the unexpected length and severity of the recession and the coincidental impact of continuing structural change, the government should review its programs to ensure that sufficient, effective and comprehensive labour market measures are directed to the workers effected by structural change if the reform agenda is to maintain the public support required for its success.
Transition From School to Work
‘Best practice’, active labour market policies give high priority to education, training and placement and treat cash payments (the ‘dole’) for the unemployed as the least acceptable response to unemployment.
As the ACTU/TDC pointed out in Australia Reconstructed:
Unemployment benefits should be treated as a last resort. As social expenditures, unemployment benefits have no long-term benefits either for society or the individual. Such outlays do not contribute to growth nor do they increase the skill base.
No-one should expect society to support those who consciously choose unemployment benefits as a ‘first resort’. But alternatives to unemployment must be made available particularly for school leavers and the long-term unemployed.
Australia must re-assess the transition from school to work. In particular, we should seriously assess the Scandinavian Youth Team Program approach. This provides 4 hours of work per day, five days per week for 18 and 19 year olds for a maximum of two years. Municipal authorities organise jobs with national authorities, county councils, local authorities, churches and private enterprise. Young people 18 or 19 years old who leave school, cannot find work and do not wish to continue their education are obligedto join a Youth Team.
Wages are paid at the standard rates. The other two and a half days may be used in the search for full-time work. In other words, it is totally unacceptable to allow young people to simply tumble out of school and straight into unemployment. Young people either have found a job, are enrolled in post-secondary education or training, or join a Youth Team.
In addition, even those under 18 who go straight from school into full time employment should receive a minimum eight hours a week training off-the-job.
In this context, and for those who have left school, the experience of the Training for Retail and Commerce (TRAC) programmes and the Dusseldorp Skills Forum in encouraging linkages between schools, work experience and training ought to be further developed, as suggested at the 1992 National Youth Employment Summit.
A Keating Labor government, in conjunction with state and local governments, must construct a comprehensive transition from school to work program which prevents young people from exiting education straight into unemployment.
If it is impossible to explain to a reasonable person why a country continues to levy a tax on employment in the face of sustained double-digit unemployment. It is time to move away from the payroll tax.
Payroll tax is one of the most ill-conceived and distorting taxes and its abolition would be a significant employment boost. But given the magnitude of payroll tax as the largest single source of tax revenue for the state governments, there must be a financially responsible phasing down of the tax with the Commonwealth and states working on a new federal tax agreement to achieve this goal.
Under Fightback! Payroll tax will be abolished and the state revenue forgone will be replaced by funds from the GST.
Inmany ways the replacement of the payroll tax with a GST will undermine any net employment effect that the abolition of payroll tax alone would have provided.
This issue is acknowledged by the Fightback! document itself. Thus:
In the circumstances of “sticky wages” that generally characterise the Australian labour market, it seems reasonable to assume that ultimately much of the burden of payroll tax falls on consumers in terms of higher prices.
To the degree to which this conclusion is correct, it seems reasonable to regard payroll tax as having some of the characteristics of a consumption tax. (Fightback! Supplementary Paper No 7, p. 3)
Currently many small to medium businesses are not paying any payroll tax. In 1988 only about 15 percent of NSW employers were subject to payroll tax.
NSW employers with payrolls less than $500,000 pay no tax. Those with $1 million payrolls pay an average of 3.5 percent payroll tax and those $10 million payrolls pay an average of 6.65 percent.
Under Fightback! payroll tax (ranging from nothing to about 7 percent maximum) will be abolished but it will be replaced by a 15 percent tax on all employers – big and small – for nearly every good and service produced and sold.
If payroll tax is bad for employment, then the GST will be a disaster.
This new and massive tax burden, upon small employers in particular, is very unfortunate given that the bulk of future employment growth is expected to be generated in the small business sector. This trend is clear both internationally and in Australia.
In America during the decade of the 1980s the Fortune 500 group of companies – the largest – cut 3.5 million jobs while small businesses created more than 20 million jobs. (Sydney Morning Herald, 8/9/92).
This trend is also being measured in the Australian labour market. The Australian Bureau of Statistics (ABS) 8 September 1992 Survey of Wage and Salary Earners show that more people are working for smaller employers and fewer workers are employed in larger firms.
It is therefore totally dishonest to suggest (as Fightback! does) that the abolition of payroll tax may lead to the creation of thousands of new jobs. In the words of Fightback!: “If it [payroll tax] were abolished, the following benefits would accrue …new jobs would be created: indeed, the Australian Chamber of Manufacturers estimates that 175,000 new jobs would result.” (ibid, p. 7)
The truth is that small business – the fastest employment generating sector – would be hit with a 15 percent consumption tax but would receive no compensation as it currently pays little or no payroll tax.
The Fightback! payroll tax/GST trade off proposal will lead to the destruction of hundreds of thousands of jobs in Australia.
The Federal Opposition’s Fightbackproposal to abolish the payroll tax and replace it With a GST is a fraudulent policy and must be rejected.
A Keating Labor government should support the abolition of payroll tax. However, given the magnitude of payroll tax as the largest single source of state tax revenue, there must be a financially responsible phasing down of the tax with the Commonwealth and states working on a new federal tax agreement to achieve this goal.
As an initial step, Labor would reach agreement with the states on exempting export related employment from the payroll tax.
State Governments and Apprenticeships
The current collapse of apprenticeship opportunities in Australia is appalling and has serious long-term implications for future growth potential.
In the last financial year 5,399 apprenticeships were lost in NSW alone. NSW public sector apprenticeship hiring was cut by almost one-third over the last 3 years. Public sector apprentice intake fell from 1600 in 1989 to 1165 in 1991.
This approach exposes the state government’s confused priorities of short-term cost cutting against long-term economic development.
As the national and NSW economies move out of recession there will be a substantial skills shortage in industry. Skilled labour bottlenecks will limit the recovery and prevent a faster fall in unemployment.
The Keating government should join with state governments in the establishment of new Government Training Consortiums to maximise the availability of on-the-job training opportunities by rotating apprentices through government departmental and sub-contractors’ workplaces.
The major apprentice employing Departments and Authorities could jointly create new Group Training Companies to be run on private sector principles.
Group Training Companies could recruit and employ all apprentices required by the Departments and Authorities plus an agreed excess number.
Such a major modernisation of the training system would provide:
- cost savings due to lower overheads;
- expert management in the organisation and co-ordination of the training process (including selection, monitoring and supervision);
- apprentices with exposure to more varied and interesting types of work experience;
- apprentice availability at times of peak workload;
- virtual elimination of unnecessary paperwork; and
- increased training opportunities for young people.
This proposal carefully balances the twin priorities of short-term relief and long-term development.
The plan is a measured approach aimed at rapidly increasing the number of on-the-job training opportunities while also improving the quality and efficiency of off-the-job training arrangements.
It is critical that both the number and quality of apprenticeships and traineeships are raised if Australia is to compete for the vital investment and employment opportunities in the 1990s. Such an approach would compliment the One Nation initiatives which have prompted an increase in apprenticeships and traineeships; recent data show increases in those areas in the last six months.
A Post 45 Year Olds Employment Policy
In the public debate and policy response to unemployment in Australia, the focus tends to be on the level of youth unemployment particularly for teenagers between the ages of 15 and 19.
Given the community’s anxiety about the long-term social and individual impact of unemployment on young people it is not surprising that the impact of unemployment upon mature workers (45 years and older) receives less political and media attention that it deserves.
The focus is unbalanced.
Unemployment in Perspective
The ABS Labour Force figures show that there were just over 157,000 unemployed 15 to 19 year olds in November 1992.
Of those 157,000, however, over 48,000 were attending school and a further 13,000 were full-time attendants at a tertiary institution.
This leaves a group of around 96,000 15 to 19 year olds (about 14 percent of the teenage labour force or 7.3 percent of the population aged 15-19) looking for work and not attending a place in an educational institution.
It would be totally wrong to underplay the seriousness of this situation, particularly when account is taken of significant under-employment, the level of ‘involuntary’ education (as a result of limited immediate employment opportunities), the level of ‘hidden’ unemployment and, the long-term consequences on the lives of young individuals.
While there are obvious reasons why teenage unemployment receives the lion’s share of the public’s attention, it is important to focus on the problems of the age group – 45 and over – whose levels of unemployment and capacity to cope with its social, psychological, and economic impact must be of equally serious concern.
The ABS figures show there are nearly 160,000 Australians between the ages 45-64 unemployed. There is also a very high (and rising) level of ‘hidden’ unemployment among this age group.
In other words, with 160,000 unemployed mature workers and around 96,000 unemployed teenagers (ignoring hidden unemployment, which occurs in both age groups), it can be argued that the per capita need for government labour market support or assistance is much greater for the mature age group.
Unlike the overwhelming majority of unemployed 15-19 year olds, many in the 45-64 year old group have spouses, dependents, mortgages and other major financial commitments (not to mention expectations of a reasonable income up to retirement and a resulting nest egg).
The impact of a sudden loss of employment, the prospect that the individual’s stock of human capital may be seriously devalued and the realisation of a sustained period of unemployment can have a devastating impact on individuals.
The realisation (for many) that they may never work again and the loss (for many) of the basis of their social status can have an individual impact every bit as profound as that on the teenage school leaver who is unable to find immediate work in a recession.
These remarks should not be seen as focusing only on the impact of the recent recession and its current labour market implications. The relative position of mature workers has been deteriorating for some time.
It has long been recognised that mature workers are more likely to be retrenched or retired early, are less likely to be retrained and find greater difficulties in establishing new careers.
Mature workers can suffer through a number of stereotypes – ‘old dogs cannot learn new tricks’ – or mature workers are less agile or more prone to ill health. Accordingly, redundancy arrangements frequently include improved benefits for workers over 45 years old.
Evidence of the difficulties facing mature workers can been seen in labour market statistics.
In NSW, for example, from the peak levels of unemployment resulting from the recession of the early 1980s to early 1989, all age groups, except the mature workers (particularly the over 55s for whom unemployment rose significantly), experienced significant falls in their unemployment rates.
While the average rate of unemployment for all groups fell by nearly 37 percent following the early 1980s recession, the unemployment rate increased by more than 44 percent for those aged 55 and above.
That recession saw a high proportion of mature workers displaced, as early retirement was used by employers to downsize, and the same has occurred recently.
Mature Aged and Long Term Unemployment
The other major disadvantage mature workers face is the chronically high levels of long-term unemployment experienced by their age group.
For example, in February 1992, the duration of unemployment among mature workers (aged 45 and over) in NSW averaged 83.6 weeks per person (the median duration was 52 weeks). In contrast, the average period off work for all workers was 46 weeks (the median duration was 21 weeks). In other words, most unemployed mature workers will be idle for well over twice as long as younger workers. But men face even greater difficulties in obtaining employment.
In all the mature aged categories, males experience double the duration of unemployment of women. By ages 60-64, (in February 1992 in NSW – which mirrors the national experience), males were unemployed more than four times longer than females.
The Federal government and state governments should add to the range and scope of existing labour market programs with the aim of enhancing access and effectiveness of existing training initiatives for mature unemployed workers.
Extra funds should be allocated in this area, especially to TAFE and other education centres developing programs for such workers.
Incentives to employ over 45 year olds, as for young workers entering the labour market, should be embraced as part of a second term Keating agenda.
Reforming the CES
Despite the very large rise in unemployment, the Commonwealth Employment Service (CES) has not received sufficient increases in resources to meet the needs of the unemployed.
With a large increase in the demand for its services, it is essential that the CES has sufficient resources and well-trained staff to provide job-seekers, particularly the long-term and disadvantaged, with the intensive counselling, support and ongoing assistance they require.
In contrast, the Fightback idea is to sell off the CES to provide operators and reduce government assistance to the unemployed. Like other Fightback policies, small business would also be hard hit by such a change.
In those countries with the ‘best international practice’, Employment Bureaus go into intensive operation from the moment a person becomes unemployed. Internationally, the frequently encountered experience is that, even with high demand for servicing, case-loads are low – in some cases only 35 unemployed people per member of staff. By contrast, the current ratio in Australia may be as high as 100 unemployed people per CES staff member.
In order to provide the necessary high quality service to our job-seekers and reduce the case-loads on existing staff, there must be a substantial increase in the number of front line CES staff. This increase staffing should obviously be focused in the regions suffering the highest unemployment levels.
The information base of the CES must also be expanded. All employers seeking new staff should be strongly encouraged to notify their local CES of all vacancies available or soon to be available in their enterprise.
This ambitious and long-term full employment program must be adopted by the Commonwealth with the support and participation of the States.
The winding down of payroll tax and the increased commitment to education, training, CES, employment and right to work programs will obviously require a massive financial commitment from the Federal government over time.
It is for this reason that such a comprehensive program can only be progressively introduced over time.
It will be introduced in the context of a sustained low inflationary economic recovery.
The benefits from a continuing program of micro-economic reform are enormous. The Industry Commission has estimated that the gains from such reform are likely to be in the order of $22 billion per year.
Labor must aggressively devote itself to the realisation of these gains, and use the dividends of micro-economic reform, renewed economic growth, low interest rates and inflation to tackle and solve Australia’s tragic and unnecessary level of unemployment.
Endnotes [as published in the original submission]
- Bernard Lagan, ‘Jobless Rate Drops, But Fewer Looking’, Sydney Morning Herald, 8 May 1992, p. 2.
- Ross Gittins, ‘Say Goodbye to the Deadend Job’, Sydney Morning Herald, 11 May 1992, p. 26.
- The Economist, 23-29 January 1993.